China is moving to sharply increase penalties for auditors who sign off on fraudulent corporate accounts, widening a campaign against financial fraud by listed companies.A draft amendment to the Certified Public Accountants Law – set for a second reading at the 23rd session of the Standing Committee of the 14th National People’s Congress (NPC), China’s top legislative body – would raise the maximum fine for issuing false audit reports to 10 times the illegal gains from the current five times. It would also allow for business suspensions, licence revocations and practice bans in serious cases.The current law has been in force for more than 20 years. The draft amendment would further regulate professional conduct, curb audit fraud and bring order to the auditing profession, said Huang Haihua, a spokesperson for the Legislative Affairs Commission of the NPC Standing Committee.“Financial fraud by listed companies seriously undermines the fair order of the capital market, and could lead to a misallocation of resources, harm investors’ rights and interests, and even trigger systemic risk,” Huang said.A key change would extend liability beyond the auditors who sign off on accounts to others in the chain of fraud. The draft would impose legal responsibility on clients, audited entities and other parties that collude with or instigate accounting firms or accountants to issue false reports.The China Securities Regulatory Commission office building in Beijing. Photo: Simon SongIt would also impose penalties on audited entities and related parties that supplied false accounting records or documents to accountants. Those whose violations constituted a crime would face criminal liability.